Oil Resources Should Benefit All People
"Oil Curse" Stalks Africa's Newest Petro-State
Here are portions of an article that appeared in the Financial Times, January 2005.
by Michael PeelIn the dilapidated Portuguese cocoa plantation houses at Agua Ize, Sao Tome & Principe, residents gather under a rotting roof to avoid the rain. Above their heads, offering a tantalising glimpse of a world beyond the surrounding dank disrepair, an old election campaign poster hints at the country's anticipated oil boom. "It is now!" says the propaganda of the opposition Party of Democratic Convergence, pledging "better sharing of resources".
Domingas da Costa Frota Pereira, an unemployed mother of three children, looks up and laughs: "They would put the money in their own pockets," she says.
Such pessimism contrasts with the international excitement surrounding a country widely styled as Africa's newest petro-state. Sao Tome & Principe, a sleepy west coast archipelago with a population of 150,000 people, is seen by many outside as the nation as having perhaps the best chance to avoid the "paradox of plenty" that has made oil-rich African countries among the world's poorest and worst-governed.
The auction for the first exploration licence in a deep water zone being developed jointly with Nigeria is expected soon to yield Sao Tome about $50m, or almost four times last year's total estimated government tax revenues. Estimates of the amount of oil in the zone run to more than 10bn barrels, although no reserves have yet been proved.
Examples abound of how other developing countries have mismanaged oil revenues, sometimes with disastrous results. To the east, Gabon's President Omar Bongo marked his 37th anniversary in power last month. To the north, Nigeria has a history of coups and corruption, while Equatorial Guinea is brutally repressive.
Sao Tome's strategic position in this problematic region is one reason why it is attracting attention. Surrounding countries account for 15 per cent of US crude imports and their share is predicted to rise towards a quarter by 2020. US civilian and military officials have visited Sao Tome increasingly frequently. Washington is also funding a feasibility study for a deepwater harbour for oil industry activity and trade.
Some anti-corruption activists are enthusiastic about Sao Tome because of hopes that the social circumstances are right to escape the so-called curse of oil. The country is small and seems largely free of the sense of ethnic and religious differentiation that dictators elsewhere have exploited to divide and rule -- the Portuguese filled Sao Tome with plantation slaves, creating a traumatic but perhaps unifying shared history. "We are all cousins here," says one local man.
The government has begun developing rules and institutions for the oil sector that are either not present or are ignored in other resource-rich states. A revenue management law co-drafted by a team from New York's Columbia University was signed into law last month. It sets up an oversight committee and requires the government to give priority to poverty reduction and spending on social areas such as health, education and infrastructure, although a proposal to earmark 80 per cent of revenues for these purposes was dropped.
Anti-corruption campaigners say the international pressure on governance must be applied equally to oil companies, which are heavily criticised for contributing to bribery, secrecy, pollution, corruption and communal tensions in countries such as Nigeria
Economic activity is starting modestly to increase in Sao Tome, the capital, where goats wander the streets and nibble at hedges. The number of banks is quadrupling -- from one to four.
But concerns remain about a possible slide towards the kind of oil-related corruption that has undermined politics and economic wellbeing in Nigeria since the 1970s.
In 2002, a company controlled by Sir Emeka Offor, the Nigerian businessman who chairs Environmental Remediation Holding Corporation, a company holding valuable preferential bidding rights for oil exploration blocs, paid $100,000 to a business owned by Sao Tome's President Fradique de Menezes.
Mr de Menezes claims the money was for political campaigning rather than a bribe.
In one of the capital's night clubs, an aspiring parliamentarian explains how being in government is "the only way to survive": it allows access to lucrative contracts that are scarce in the country's tiny private sector. Opposite him, a sitting MP cheerfully describes how he runs a successful customs clearing business. "We are the ones with the money," he says.
Mr de Menezes's government was deposed for a few weeks in 2003 in a bloodless coup whose leaders protested about management of the country's wealth.
At the Agua Ize houses, residents say they hear nothing from the government and add that the few recent building improvements have come from a French-funded renovation project. Portugal has given money to a community kitchen -- a poster on the wall refers strangely to the "500 years of mercy" shown by the one-time slavers, who clung on to their colony until 1975 without developing its economy in any meaningful way.
For now, Agua Ize residents still need much convincing that the latest wave of foreign involvement will bring fairer results than the last. "It's good for oil to come," Ms Pereira says. "But we are not going to benefit."
Lindy Davies on Oil Dividends for Nigeria
Alanna Hartzok on Citizen Dividends And Oil Resource Rents
Jeffery J. Smith on After Oil Peaks, Geonomics Wins the Next Wave
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